Only the lawyers are cleaning up

July 31, 2009

A man cleans a row of rickshaws in Karachi July 26, 2009. REUTERS/Akhtar Soomro A month of overcast skies and frequent showers indicates it is business as usual for the British summer, and for one company each day of rain brings particular displeasure.

British car cleaning firm IMO Car Wash is struggling with more than 350 million pounds of debt, and some detractors say demand for its services drops each time it rains. As such, the value of the company is almost as changeable as a British summer.

This is a headache for both its private equity owner and lenders, who have been trying to settle a restructuring of IMO’s finances since the start of the year. Disputes over valuations have sparked a battle between different groups of lenders, with the result set to be decided in a London court on Monday.

The court case has wider ramifications for European restructurings, as I wrote earlier, because the case is likely to set the tone for many restructurings to come.

Senior lenders hope to be able to clear out junior creditors from the list of borrowers if the value of the company falls below the amount of senior debt owed. The seniors think they have done enough to prove the value of the company is less than their debt; the junior lenders disagree.

The decision is now with Mr Justice Mann at London’s Royal Courts of Justice. Such is the interest amongst distressed debt and mezzanine investors it’ll likely be a tight squeeze in the court’s public gallery on Monday.

Maybe they should all have heeded Rose Royce: as the Seventies act once warned, “you might not ever get rich” working at the car wash.

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